■Where the liquidator continues the business, as where
he allows employees to continue with work in pro-
gress in order to make complete and more saleable
products, he may be regarded as an agent of the com-
pany so that the employment continues. Alternatively,
the court may regard the appointment of the liquidator
as a giving of notice to the employee who then works
out that notice under the liquidator. It is, however,
the better view that employees may, if they so choose,
regard themselves as dismissed because the company
has ceased to employ them, the new contract being
with the liquidator. In practice, if the liquidator con-
tinues to use the services of the employees and pays
them, the Department of Work and Pensions treats
the redundancy of the employees as occurring at the
time of their eventual dismissal by the liquidator.
2 A voluntary winding-up.This commences on the
resolution of the members and if the company’s busi-
ness ceases there is a dismissal of employees. If the com-
pany’s business continues, the position would appear to
be as set out in the second point above.
Bankruptcy
The bankruptcy of an employer, such as a sole trader,
or indeed of the employee, does not automatically dis-
charge the contract of service, though it will if there is a
term to that effect in the agreement. Thus, the employ-
ment can continue, though in practical terms it may
be impossible to pay employees’ wages, and in this
case they will be discharged and will be able to make a
claim for a redundancy payment, as well as one in the
bankruptcy for wages accrued due in regard to which
they have a preferential claim in the bankruptcy.
A trustee in bankruptcy cannot insist that an em-
ployee continue in service because the contract is one of
a personal nature. The bankruptcy of an employee will
not normally affect the contract of service unless there is
a term to that effect in the contract. Company directors
provide a special case since the articles of most com-
panies provide for termination of the office on becoming
bankrupt.
Wrongful and summary dismissal at
common law
The claim at common law for wrongful dismissal is
based on a general principle of the law of contract, i.e.
wrongful repudiation of the contract of service by the
employer.
The common law action has, of course, been largely
taken over by the statutory provisions relating to unfair
dismissal and a common law claim is only likely to be
brought by an employee who has a fixed-term contract
at a high salary. Thus a company director who has a
fixed-term contract for, say, three years at a salary of
£150,000 per annum might, if wrongfully dismissed,
find it more profitable in terms of damages obtainable
to sue at common law for breach of contract, though
the employer may be able to resist the claim where the
employee was guilty, for example, of misconduct, dis-
obedience or immorality.
This may well change since there is now no monetary
cap at all where dismissal is because the employee has
blown the whistle on his employer and reports, e.g. a
health and safety infringement within the organisation
to the Health and Safety Executive or a suspected fraud
to a City of London regulator, such as the Financial
Services Authority.
In other cases where the contract of service is not for
a fixed term, there is no claim for damages at common
law, provided that the employer gives proper notice or
pays wages instead of notice, though in such a case the
employee has, at least potentially, a claim for unfair dis-
missal which he could pursue. Again, the employer may
resist a claim for unfair dismissal on the basis of mis-
conduct, disobedience or immorality. We have already
given some consideration to these matters in the context
of statutory unfair dismissal.
Under powers given by s 3 of the Employment Tribunals
Act 1996, employment tribunals can hear cases of
wrongful dismissal, though there is a cap of £25,000 (i.e.
lessthan the statutory claim for unfair dismissal) on the
damages that can be awarded. Claims for higher sums
must be made in the county court or High Court.Wrongful dismissal and unfair dismissal:
effect of damages cap
What is the position where a tribunal hears a case
for wrongful dismissal and, while accepting that the
claimant’s loss is greater, makes an award of £25,000
being governed by its cap? Can the claimant then pro-
ceed with a claim in a county court or the High Court
for the balance between the capped award and the actual
loss?
The Court of Appeal dealt with this situation in the
following case.Part 4Business resources